Singapore is raising taxes on the wealthy and increasing other levies, including the Goods and Services Tax (GST), to restore its finances after unprecedented expenditures to weather the coronavirus pandemic.
Finance Minister Lawrence Wong has also announced a package worth S$500 million (US$372 million) to support jobs and businesses as part of the budget for the fiscal year starting April 1, adding that the government will extend separate targeted help for the struggling aviation sector.
Wong said on Friday that the planned tax changes, which include higher consumption and carbon taxes, are needed to foster a “fairer revenue structure”.
“That means everyone chips in and contributes to a vibrant economy and strengthened social compact, but those with greater means contribute a larger share,” he said.
Despite the new revenue efforts, Singapore is on track to post its third straight budget deficit. Wong said the shortfall would total S$3 billion, or about 0.5% of gross domestic product.
“Our budget remains expansionary to support the economy,” he said.
The government has committed close to S$100 billion over the past two years to cushion people, businesses and the economy from the impact of the pandemic.
Wong also said the government would set aside S$560 million to help Singaporeans deal with the rising cost of living.
Among the “wealth taxes” he outlined, top marginal personal income tax levels will be raised — peaking at 24% for income over S$1 million (US$744,000) — and levies will be adjusted on some properties and vehicles.
Separately, the anticipated rise in the GST will be spaced out over two years — increasing from 7% to 8% in 2023 and to 9% in 2024, Wong said.
Wong is seeking to chart a post-Covid future for the city-state, focusing on rebuilding finances to face long-term challenges such as rising social spending and health-care costs as the local workforce ages.
The new taxes are aimed at restoring public coffers after the government committed about S$100 billion toward Covid-related spending over the previous two years.
Increased personal income taxes for those earning more than S$500,000 a year will raise an additional S$170 million, while new property taxes will net an extra S$380 million and car levies will give the government another S$50 million a year.
Higher taxes on wealth generate revenue and “help to circulate a portion of the wealth stock back into our economy and in so doing help mitigate social inequalities” Wong told parliament.
“Wealth taxes are therefore needed to help build a fairer society where everyone can aspire to succeed regardless of their backgrounds.”
Residents with annual income of over S$320,000 currently pay 22% in tax. From 2024 onward, incomes between S$500,000 to S$1 million will be taxed at 23% while those above S$1 million a year will pay 24% in a move expected to affect the top 1.2% of personal taxpayers and raise S$170 million.
Singapore, already one of the world’s most expensive places to drive a car, will further increase that cost. A new tier of tax on vehicles with a market value above S$80,000 is expected to raise S$50 million in revenue a year.
But the bulk of the new funds will come from taxing high-end properties. For owner-occupied residential properties, the tax for the portion of annual value in excess of S$30,000 will be increased to between 6% and 32% — from the current range of 4% to 16%. For non-owner occupied residential properties, the current tax rates of 10% and 20% will be increased to 12% to 36%.
Once fully implemented, the changes will raise Singapore’s property tax revenue by about S$380 million a year, Wong said.
“Ideally we would want to tax the net wealth of individuals but such a tax is not easy to implement effectively,” he said. “Many forms of wealth are mobile and as long as there are differences in wealth taxes across jurisdictions, such wealth can and will move.”